Around $4-$5m in ARR, You Probably Will Need a Chief MRR Officer

At Dreamforce, Gainsight, a leading SaaS company/service for managing customer success, was kind enough to invite me to speak at their session on Customer Success together with Dan Steinman, their COO.  Prior to Gainsight, Dan was VP of Customer Success at $100m+ ARR and IPO’d SaaS leader Marketo and really knows his stuff, as you’d expect.

One thing Dan brought with him was a series of org charts, showing how your Customer Success structure can and needs to grow over time as your business grows.  I’ve embedded those charts below:

To me what was most interesting was that as terrific and insightful as these org charts are, and as many SaaS company org charts as Gainsight and Dan have here — that there was no clear answer to one conundrum I’ve wrestled with, and I suspect you will too:  Who Should Be the Chief MRR Officer?

By that, I mean, around Year 2.5 or 3, your renewals and upgrades business should be humming.  With millions in revenue coming from the installed base.  And you’ll end up with two (or more) joined-at-the-hip but very distinct organizations managing two distinct multi-million dollar revenue streams:  New Business (i.e., Sales) and Existing Business and Upgrades/Upsells (Customer Success, or maybe, Customer Success + Account Management).

There are inherent synergies between the two sides — but also some conflicts at the margin, or at least, “unoptimizations”:

  • Is Sales Responsible for New Business Only, or New Business + Renewals?
  • If Sales is Responsible for Both, Which is More Important?  And how can both be #1, really?
  • Does Sales work to a bookings goal, or the overall company MRR goal?  The latter sounds nice and maintains alignment.  But is it really sales fault if they hit the bookings goal but not the MRR goal?  Salespeople want to own quotas and bookings, exceed the plan, and get paid a ton.  And let the other guys handle post-sales, unless they can get quota credit there.
  • Does Customer Success work to renewals and upgrades goals, or the overall company MRR goal?

As you can see, there are conflicts.  The great VPs of Sales mostly want to sell.  Not deal with post-sales customer issues and drama.  And the great VPs of Customer Success put customers first, revenue second.  Because they understand implicitly second-order revenue, and that all good things in SaaS stem from happy customers.

So who is responsible for the intersection?  The VP Sales grows sales.  The VP Customer Success maximizes customer success.  But neither of those goals are 100% aligned with the sole goal of growing the topline, the MRR.  90% aligned yes, but not 100%.  Because of that, sales hates churn … but obsesses over it less than a lost sale.  Because of that, customer success usually cares more about churn … and cares, but less, about the extra dollar here and there from the installed base.

If you want to maximize the revenue from your entire revenue process — sales to new customers to renewals to upsells — someone senior’s #1 job has to be not just sales, and not just retention, and not just upgrades — but maximizing MRR.

The problem is this usually will be you, the CEO.  And that’s OK and even good for a while, for a couple of years even maybe.  But eventually, if it’s not 100% of your job, and/or 100% your passion … you’ll leave real money on the table.  I did.

So how do you staff this?  Do you really need to appoint a Chief MRR Officer around $4-$5m in ARR?  At a titular level — goodness no, I hope not.  I blame the CFOs for starting this C-level title inflation, which then spread to the CTO, the CMO, and byzantine titles like CSO, CCO, etc. etc.  Too many chiefs = not enough line owners.  (Once long ago, I was a CBO.  Chief Business Officer.  And I had no idea what that meant).

But what I do see more often is, say, a Chief Revenue Officer responsible for the whole top line growth, distinct from the VP of Sales.  Or a Chief Operating Officer whose real job is to make sure Sales and Success are working together to maximize total productivity from the base.

I don’t have the perfect answer to this one at the org chart level.  What I do know is the Chief MRR Officer, whoever that is on the management team, needs to be someone distinct, and someone besides you, as get to $10m in ARR, and likely well before.  By the time we got there, even with an epically amazing sales team, it was clear to me we could have closed even more revenue if I wasn’t the one ultimately managing Sales and Customer Success together to the corporate MRR goal.  I hacked it by having my VP Sales responsible for a CYE MRR goal, not just bookings, and since he was great, this worked for a while.

But still, I think I left about 10% growth on the table once we hit about $4-$5m in ARR by not having one key owner of MRR besides me, and it became painfully clear around $8-$10m ARR that we were missing a senior resource there.  Sales was killing it, but we needed someone to own the entire lifecycle of revenue.

That could systematically own maximizing the revenue from every single account, no matter when it closed, or how it closed.

So I’ll keep you posted on my learnings on new org charts and new structures here, and I’d appreciate yours as well.  However you do it, though … make sure you have a Chief MRR Officer by function if not title once you have a few million in ARR from your installed base.  Inflect your growth rate up another 10% from this hire, and you’ll more than pay for the position right there.

One comment

  1. Just used this post as the backbone of the pitch on what I’m going to do next at work. Thanks for helping me find out what do with my life!

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